India’s benchmark stock index climbed to a one-month high amid speculation the central bank will reduce borrowing costs next month, with Tata Power Ltd. advancing after it reported profit that beat estimates.
Tata Power, the biggest non-state generator, rallied to a two-week high. ICICI Bank Ltd. rose for a second day this week and Housing Development Finance Corp., the top mortgage lender, was the best performer on the S&P BSE Sensex. Hindustan Unilever Ltd. rallied the most in two weeks.
The Sensex climbed 0.7 percent to 27,837.21, the highest close since April 22. The gauge capped its second weekly gain on Friday amid expectations slowing inflation will give Reserve Bank of India Governor Raghuram Rajan room to reduce borrowing costs for a third time this year. Rajan left interest rates unchanged last month as he waited for banks to pass on previous reductions to customers. The next policy review is on June 2.
“Real interest rates are too high in India,” Jonathan Schiessl, the head of equities at Channel Islands-based Ashburton Investments Ltd., which oversees $12 billion, said in an interview with Bloomberg TV India on Wednesday. “We expect a 25-basis point cut in the June meeting.” Further easing in policy will depend on the progress of the monsoon, he said.
Consumer prices climbed 4.87 percent in April from a year earlier, slowing from 5.17 percent in March, data showed last week. That’s below the RBI’s 6 percent target level for January 2015. India’s June-September monsoon, which waters about half of the nation’s farmlands, is crucial this year after unseasonal rain and hail ravaged winter crops.
Tata Power posted a fourth-quarter profit of 1.59 billion rupees ($25 million) after market hours on Tuesday. That beat the median estimate of 772 million rupees in a Bloomberg survey and compares with a loss in the year-earlier period. The stock advanced 1.6 percent to its highest level since May 4.
Nine of the 15 Sensex firms that have announced results for the March quarter so far have beaten or matched estimates.
“We’re looking for a decent pick up in earnings coming through in 2016, and probably through the middle of the year,” Schiessl said. “We believe the recovery is happening but it will come through with a lag.”
ICICI Bank gained 1.1 percent, while HDFC Bank Ltd., the biggest lender by value, increased 1.6 percent. Bharti Airtel Ltd., the largest mobile-phone operator, climbed for the fifth day, while Hindustan Unilever increased 1.3 percent.
Tata Steel Ltd., the biggest producer of the alloy, will probably say on Wednesday that its fourth-quarter net income plunged 79 percent to 2.17 billion rupees, according to the median estimate of 19 analysts in a Bloomberg survey. The shares declined 1.9 percent.
The Sensex has risen 1.2 percent this year and trades at 15.4 times projected 12-month earnings, compared with the MSCI Emerging Markets Index’s multiple of 12.3.